Natural Gas Price Forecast: Oversold Levels Suggest Potential Rally

Weekly Consolidation Near Support

For the fifth day, natural gas consolidated on Friday near lows and within a narrow range for the week, with a high of $3.32 and support at $3.06. A long-term uptrend line marks key dynamic support, which has been tested all this week. Moreover, this area marks the bottom boundary of a large ascending channel, adding to its significance as support. One minor positive for the bulls is that Friday’s close is likely to finish above the closing prices of the prior four days. The session low also appears to be a direct test of trendline support.

Bullish Reversal Could Trigger Strength

If a weekly bull reversal triggers above $3.32, natural gas will show strength and be poised to trend higher. Since it would be starting from a long-term support zone, additional signs of strength should follow. Specifically, a rally above the 200-day moving average at $3.60 and a lower swing high, and a weekly high at $3.74 would provide confirmation. Natural gas is on track to complete a bullish doji hammer candle pattern on the weekly chart. Once a breakout triggers, this week’s low would result in a higher swing low for the long-term uptrend.

Potential Scenarios for Price Action

Two scenarios look likely. First, natural gas may continue to stay weak for a while longer and consolidate inside this week’s range. But if it holds above support for the week, an inside week pattern may set up for an eventual bullish signal above the week’s high. Second, a weekly bull reversal could trigger next week above $3.32 as buyers take back control.

Initial and Fibonacci Upside Targets

An initial target is last week’s low of $3.74. But since natural gas would be rising from the bottom of a rising channel, the middle of the channel becomes a target, and if strength is sustained, the top of the channel. Since this week’s low would be confirming the bottom boundary of the channel, the top boundary is a potential upside target. Nevertheless, once $3.74 is reclaimed, the 38.2% Fibonacci retracement at $4.73 becomes a target, along with the 50% retracement of the full recent downtrend, at $5.25. Note that the first Fibonacci target is currently near the middle of the channel.

Oversold Conditions Signal Rally Potential

A weekly bullish reversal would end a 58.7% decline in the price of natural gas. That exceeds the previous two large downswings of 46.5% and 40.1%, which occurred since the 2024 bottom. This suggests that natural gas is overextended to the downside and overdue for a rally.

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